Late Surge Pushes Stocks to New Heights

Technicals vs. Fundamentals

Today's late move aside, equities have been trading sideways in recent weeks, with little conviction in either direction. The bulls haven't been able to gain much traction after 2003's dramatic rally and the bears have been spinning their wheels as profit and economic reports continue to surprise to the upside.

With fundamental issues failing to move stocks of late, technical factors may offer the best insights into the market's direction over the next few months. Some technicians say the rally may still have legs, but surprisingly, one believes fundamentals will be the range buster, despite its recent inability to significantly influence the market.

"The market's dramatic recovery trend of the last 10 months continues to show strong upside momentum despite its apparent age," said Richard McCabe, chief market analyst at Merrill Lynch. "While an interim pullback could develop in coming months, the advance is not likely at a final peak yet."

Rick Bensignor, a technical strategist at Morgan Stanley, echoed this sentiment, but is convinced fundamentals will trump technical factors. "Our belief is that the market will keep its bull tone until some bigger macro factor changes the way of thinking."

Both McCabe and Bensignor, however, warn there could be rough patches ahead. "Sentiment indicators generally reveal a very high level of optimism, which can leave the market vulnerable to disappointing or negative news, but these measures are not good timing tools," added McCabe.

Movers

In earnings news, Lexmark(LXK Quote) said Monday it earned $1.05 a share in the fourth quarter, ahead of analysts' estimates for 92 cents a share. Revenue rose 13.4%. The shares added $5.66, or 7.2%, to $84.50.

American Express (AXP Quote) earned 60 cents a share in the fourth quarter, beating the consensus by just a penny; the company earned 52 cents a year ago. The stock climbed 99 cents, or 2%, to $50.95.